Hershey Co. (NYSE: HSY) is seeking US regulatory approval to make a massive cocoa purchase that would exceed standard trading limits by nine times as global shortages drive prices to record highs, according to Bloomberg News which cited sources familiar with the discussions.
The report says the Pennsylvania-based chocolate maker wants to secure more than 90,000 metric tons — about 5,000 20-foot containers — through ICE Futures US.
The request to the Commodity Futures Trading Commission comes as global cocoa production enters its fourth straight year of deficit, following crop failures in Ivory Coast and Ghana, which typically supply more than 60% of world cocoa.
Also read: Cocoa Futures Surge Past $11,700 As Supply Crisis Deepens
Exchange-certified stockpiles have fallen by more than 70% since May 2023, while futures prices nearly tripled in 2023. The supply squeeze has pushed many traders from the market, dropping open interest by 65% last year. Farmers are also reportedly moving away from the crop.
Hershey’s proposed purchase would equal virtually all currently available exchange-certified cocoa stocks. The company aims to bypass both exchange-imposed limits and federal restrictions that cap positions at 4,900 contracts.
The company said in November it was “well hedged” in 2024, though Chief Financial Officer Steve Voskuil warned of higher cocoa costs this year. A company spokesperson maintains Hershey follows a “rigorous” sourcing strategy and holds sufficient cocoa supplies for 2025.
The confectioner previously disrupted market dynamics in 2020 when it obtained exchange permission for a large-scale cocoa purchase that drove contract premiums to record levels during the pandemic. Notably, Milbank LLP partner Joshua Sterling, a potential CFTC chair candidate under a future Trump administration, represents Hershey in the matter, the sources said.
Information for this story was found via Bloomberg, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
